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Hermès to Back Brand in China

Hermès International is backing a new brand in China that is set to launch for spring.

PARIS — In a bold move, Hermès International is backing a new brand in China that is set to launch for spring.

The luxury firm has taken a majority stake in a Shanghai-based company, Shang Xia, which will create, manufacture and sell a collection of clothing, accessories, furniture and other lifestyle objects. These are to be made using Chinese raw materials and artisanal know-how, Hermès said.

Qiong Er Jiang, a Chinese furniture and jewelry creator who has designed for Hermès, is Shang Xia’s managing and artistic director. She is overseeing a Chinese team, and the company “operates in an autonomous fashion,” Hermès said.

Shang Xia marks the first time Hermès has been involved the creation of a brand from scratch. In the past, it has either bought all or part of existing brands.

The initial Shang Xia store is scheduled to open in Shanghai this spring, and a Paris-based boutique is set to follow in the fall. The locations have not been announced.

Hermès International chief executive officer Patrick Thomas declined further comment.

Fast-growing China is becoming the top expansion priority for a wide swath of European brands. Bain & Co. expects the luxury market in China will grow 12 percent to 6.6 billion euros, or about $9.9 billion, this year.

Louis Vuitton, Christian Dior, Gucci Group, Chanel, Lanvin, Yves Saint Laurent, Boucheron, Salvatore Ferragamo and Ermenegildo Zegna, among others, have made China a priority.

An analyst, who asked not to be identified, said it was unusual that a Mainland China-based executive will run Shang Xia, a rarity in the case of a Chinese brand linked with a Western company.

News of Shang Xia first broke on the Web site of the French economic magazine Capital.

Hermès is no stranger to China, where it has 16 stores and has been ringing up strong sales. In November — after disclosing its third-quarter results — Hermès concurred with assessments made by rivals LVMH Moët Hennessy Louis Vuitton and PPR in saying its operations in Asia, excluding Japan, recorded “impressive sales growth” fueled by a robust expansion in China and South Korea.

Brands are also focusing on China because the world’s most populous nation, and other emerging markets in Asia, have weathered the economic crisis better than the U.S., Japan and European nations.

Much of 2009’s retail expansion activity was in China. In a recent report, J.P. Morgan estimated that most companies registered sales growth of more than 40 percent in China this year as its customer base, including locals and travelers, increased by more than 30 percent. Analysts Melanie Flouquet and Corinna Beckmann forecast China’s consumer base will grow another 25 percent in constant currency terms in 2010, while that of the rest of Asia, excluding Japan, is seen rising 10 percent.

Shanghai Tang is among the companies bullish about its prospects in China. In July, it took back its distribution there.

“The main priority for Shanghai Tang as a brand is China, because it is the biggest luxury market,” Raphael le Masne de Chermont, the company’s managing director, said in the fall. “To come into the market being Chinese is an asset, but also a liability. We have to explain that it is OK to be luxury and Chinese. We must be luxurious and wearable, and come with a true creative vision of what Chinese design can mean.”

Making a distinctly Asian mark in a landscape where customers largely prefer the novelty and prestige of Western styles and brands is among the challenges of brands looking to crack the Chinese market.